BJP leaders deny, demonetisation wasn’t secret

In a discussion with NDTV during the Hindustan Times Leadership Summit, Union Power Minister Piyush Goyal sparked a controversy by claiming that the entire Cabinet remained in the dark about Prime Minister Narendra Modi‘s demonetisation drive and that Arun Jaitley, the finance minister, kept the entire exercise secret and caught them by surprise with this decision. According to the government, the demonetisation exercise was conducted in utmost secrecy.

This is the official version of the narrative since the fateful evening of November 8th, and the entire nation has been made to believe that the Modi government kept the entire demonetisation exercise secret, even from the ruling Bharatiya Janata Party (BJP) leaders.

Modi has said that if black money hoarders had known about the demonetisation decision even 72 hours before it was made public, they could have found a way out.

The prime minister continues to assert that the secrecy around demonetisation was his masterstroke and that it shattered black money hoarders and corrupt people.

Meanwhile, several BJP leaders have been found tweeting pictures of the new Rs 2,000 notes before they were officially released. Some have been caught with Rs 4 crore of new currency notes. A youth leader of the saffron party in Salem, who claimed he would love to stand in the queue for the nation, has been caught with Rs 20 lakh of cash in new currency notes when people are suffering due to a cash crisis.

These developments prompt questions regarding the level of secrecy surrounding the demonetisation exercise and how much of classified information had leaked, reaching the ruling party’s leadership.

Did secrecy shroud demonetisation decision?

Information available in the public domain indicates that the decision to demonetise Rs 500 and Rs 1,000 was made long back in April 2016.

In April, the State Bank of India (SBI) dismissed Reserve Bank of India (RBI) Governor Raghuram Rajan’s contention that elections in several states have caused a surge in cash accumulation among a section of the public. Dismissing the RBI chief’s observation, the SBI stressed that it was “rumours” regarding the demonetisation of Rs 500 and Rs 1,000 notes that have led to the surge in cash accumulation.

This was even reported in India’s mainstream press. This indicates that it’s unlikely Jaitley and his ministry were completely unaware of the market speculation surrounding such a major policy decision. If the ministry indeed remained in the dark about demonetisation despite the SBI’s knowledge, it indicates a major intelligence failure.

If Goyal’s claims, made at a public forum, are correct, then they also indicate a possible lack of communication within the cabinet. Jaitley has either withheld information from his colleagues throughout the tenure

In either case, the reports from April and the developments in November indicate a major lacuna that the government appears unwilling to address.

What was out in public domain?

In his report, the SBI’s Chief Economist Soumya Kanti Ghosh had mentioned in his April report that the surge in cash accumulation was not linked to the elections in Assam, Kerala, Puducherry, Tamil Nadu and West Bengal, as such trends were not seen in either during the 2014 Lok Sabha elections or the 2012 Punjab and Uttar Pradesh elections.

Highlighting these trends, Ghosh underlined that speculation about demonetisation was a major reason for the surge in cash. The report indicated that cash could have been moved to tax havens to lock them in properties.

The bank’s research department said speculation was rife about the possibility of demonetisation. According to the SBI’s report, the news was already out in April, which gave around seven months’ time to the alleged black money hoarders to take necessary actions, despite the prime minister’s claims.

Speaking on the speculation of demonetisation, SBI chief Arundhati Bhattacharya stressed that it could be a game changer and even advocated many measures to make it work.

Bhattacharya had even claimed that the developments in April made deposits lower than advances, causing a major problem for the bank.

Surprise leaves trails of suffering

Based on the SBI report and the media coverage of the issue seven months before the demonetisation drive, it’s assumed that the decision wasn’t shrouded in secrecy. If the news was out months ago, questions arise over how such a crucial speculative news didn’t permeate down the society but remained confined within that section which could move cash to buy assets in tax havens.

If such information was available to the public beforehand, experts opine, they could have gradually exchanged their cash; a nationwide chaos and economic disaster could have been averted, and the economy could’ve also evaded the shock.

However, the tightly controlled leak, which remained afloat among a few, indicates that the information wasn’t meant for the general public but a target group. This raises questions on the possible complicity of insiders, which the Modi government has denied so far.

If most of India’s cash returns to the banks during this demonetisation period, it will prove that cash hoarders have dodged the bullet Modi intended to hit them with. It remains to be seen whether Modi’s decision ends up hitting only the poor or seriously affecting cash hoarders. Only the end could justify the means, economic experts have claimed.